While some still debate climate change, on 11/22/17, eight of the oil and gas industry’s biggest players signed on to a set of Guiding Principles for reducing methane emissions across the natural gas value chain. BP, Eni, Exxon Mobil, Repsol, Shell, Statoil, Total and Wintershall, in collaboration with international institutions, NGOs and academics, drafted the Guiding Principles.

It will be interesting to see if these “voluntary principles” eventually become enforceable regulations. Likewise, it will be interesting to see if these guidelines become “industry standards” and, accordingly, whether by acquiescence, private litigation, or lender requirements, become de facto regulations.

Time will tell.

It is significant to see so many major oil and gas industry actors responsibly, firmly and publicly commit to both reduce methane emissions and advance monitoring. Perhaps now others in the industry will be more inclined to join the responsible eight and commit to pass less gas.

On September 14, 2011, I posted a blog piece that was entitled “A Tug of War: How Can the State Satisfy Its Burden of Proof?” This posting discussed the diametrically opposed decisions of an Ohio trial court and an appeals court on the important issue of the kind of evidence necessary to prove a violation of an air emission limitation in an operating permit. This closely watched case in Ohio eventually reached the Ohio Supreme Court, which finally announced its decision on December 6, 2012.

In State ex rel. Ohio Attorney General v. Shelly Holding Co. the Ohio Supreme Court sided with the appellate court and ruled that the civil penalty calculation started on the date of the violation, as demonstrated by the failure of a stack test, and continued until the permitted source demonstrated compliance with the emission limitations. Over the objections of Shelly and several industry amicus filings, the Ohio Supreme Court concluded that the state enforcement agency need not prove that the facility was operating out of compliance for each intervening day; such noncompliance can be presumed.

The issue arose, in part, because Shelly failed stack tests that were conducted under unrealistic, maximum-possible conditions when in fact day-to-day operations were likely to generate lower emissions. The state argued that Shelly should have discontinued operations until a subsequent stack test successfully demonstrated adherence to the permit’s emission limitations. Alternatively, the air pollution source could apply for and receive a new permit with different limits, or it could make intervening facility modifications that would enable it to pass the stack test. Shelly felt that it was improper to presume that the facility would exceed its emission limits unless the state makes a prima facie showing that the violation is likely to be ongoing or continuing.

After concluding that the burden is on the violator to prove by a preponderance of the evidence that there were intervening days on which no violation occurred or that the violation was not continuing in nature, the Ohio Supreme Court found no constitutional problem with extending the penalty to those subsequent days after the failed stack test. Thus, in Ohio, the beginning date for calculating a civil penalty for an air pollution control violation is the first date of demonstrated non-compliance (the failed stack test) and continues, even at lower operating rates, until the facility demonstrates a return to compliance.

While this decision arose in the context of an air permit, the State of Ohio is likely to cite it in other programs, such as NPDES permits.

All of us know that enforcement of the Clean Air Act’s (CAA) proscriptions against pollutant air emissions is premised on the concept of Acooperative federalism. We know that the CAA’s policy development and enforcement regime is based upon a division of state and federal regulatory responsibility. Stated simply, the concept is that the federal government, through the EPA, sets standards for permissible emissions of substances affecting ambient air quality while individual states retain responsibility for implementing programs to enforce these standards.

The States’ implementation mechanisms are aptly titled State Implementation Plans or SIPs. SIPs are employed to demonstrate that federal and state air pollution regulations will allow counties in a particular state to meet federally mandated ambient air quality standards (NAAQS). The SIP process approval results in pollution control requirements which govern and often times unduly complicate compliance efforts of state regulators. They can also increase compliance costs borne by the regulated community. One aspect of that conundrum is the fact that when States fail to meet deadlines for attaining these standards, the regulators themselves can face sanctions from EPA and even suits by the public. Litigation and its costs complicate matters further.

As some regulators in Pennsylvania recently observed . . . [T]he current aggressive schedules for NAAQS reviews, State Implementation Plan (SIP) development and promulgation of Maximum Achievable Control Technology (MACT) standards are significant problems. Taken together, these inefficiencies are a resource drain on EPA, the states, the regulated community and the economy as a whole. The messy situation described in this quote is the subject of this blog.

The turbulence inherent in this divided relationship has escalated in recent times fraying the long-standing statutory regulatory compact between the federal government and the States.

An instructive example of the conflict of enforcement concept and reality engendered by the CAA’s cooperative federalism scheme was clearly highlighted in the recent case WildEarth Guardians v. Jackson. This case dealt with EPA’s delays in approving SIPs or pollution control plans affecting discharges of fine particulate matter or PM2.5. The plaintiffs in Wild Earth alleged that EPA failed to take final action under section 110(k)(2) and (3) of the CAA to approve SIP submittals in twenty (20) states meeting applicable requirements respecting the 2006 PM2.5NAAQS.

In 2006, the U.S. Court of Appeals for the District of Columbia had found that EPA’s PM2.5 NAAQS had to change because it failed to adequately protect human health. A change in this NAAQS required a change in States SIPs. SIPs were proposed but languished at EPA. Five years later, the plaintiffs in Wild Earth alleged that . . . [W]ithout infrastructure plans, citizens are not afforded full protection against the harmful effects of PM2.5 while seeking declaratory and injunctive relief.

Shortly after the suit was filed the plaintiffs and the EPA entered into a settlement. A consent decree called for the EPA to approve or disapprove SIP submittals for the 2006 PM2.5 standard as early as September 12, 2012 for some of the states involved and as late as February 13, 2013 for others. The Consent Decree was entered and the case dismissed in May of 2012. Case closed and compliance efforts back on track?

Unfortunately, many of the underlying issues raised in Wild Earth, specifically, the lack of cooperation between the States and the federal government on implementation of the PM2.5 NAAQS have raged on unabated. For example, eleven (11) states sued the EPA over the agency’s alleged failure to promulgate final NAAQS for PM2.5. In New York v. Jackson the plaintiffs are seeking a declaration that EPA is in violation of Section 109(d)(1) requesting that EPA review, propose and promulgate a new PM2.5 NAAQS. On June 14, 2012, EPA announced a proposal to strengthen the NAAQS PM2.5. Almost simultaneously, the D.C. Circuit issued an order refusing to set a schedule for EPA to issue a new PM2.5 NAAQS. Am.Farm Bureau v. EPA.

These developments will inevitably spawn additional delays in PM2.5 related SIP modifications and EPA approvals. That is the point of these comments on this small corner of CAA regulation and enforcement. Is the cooperative federalism underpinning of the CAA still workable? Can court’s recognize and respect the concept when regulatory policy, administrative lethargy and real human health concerns collide? These comments and observations have focused on the PM2.5 issue mainly because it has come up in some recent work in our office.

Without doubt other and more far-reaching examples of regulatory and judicial “turbulence abound, i.e., the raging fight over the EPA’s Cross State Air Pollution Rule (CSAPR). In a dissenting opinion on the CSAPR case, on the concept of cooperative federalism, Judge Rogers had this to say. . . [T] he result is an unsettling of the consistent precedent of this court strictly enforcing jurisdictional limits, a redesign of Congress’s vision of cooperative federalism between the states and the federal government in implementing the Clean Air Act based on the court’s own notions of absurdity and logic that are unsupported by a factual record, and a trampling on this court’s precedent on which the Environmental Protection Agency was entitled to rely . . . . Whew!

So what are CAA practitioners to make of the mess Judge Rogers eloquently describes? This blog entry offers no practical guidance for those laboring for an aggrieved client nor laments a bad result impairing enforcement prerogatives of the regulators. Instead, I only point out that it may be time for a concerted effort to step back and reconsider whether the CAA’s cooperative federalism’s bifurcation of rule promulgation and enforcement continues to make scientific, policy or common sense in today’s world.

Companies who wrestle with whether their various air pollution-emitting operations must be grouped together for Title V permitting purposes have received some assistance from a recent Sixth Circuit opinion. In Summit Petroleum Corporation v. U.S. EPA, 2012 FED App. 0248P (6th Cir.), the court curtailed EPA’s expansive interpretation of a “single source” under the Clean Air Act.

By rule, operations belong to a single source if they: (1) possess the same SIC codes; (2) are located on contiguous or adjacent land; and (3) are under common control. See 40 C.F.R. § 52.21(b)(5), (6). In addition, by policy, EPA has expanded the definition of “single source” to include not only the facilities that meet these three criteria, but also those facilities that provide support to an adjacent central operation. See Preamble to the August 7, 1980 final Prevention of Significant Deterioration (PSD) regulations, 45 FR 52676; Preamble to Revised Part 51 and Part 70, Draft, February 18, 1998. And, EPA has taken a “functional” approach to the term “adjacent,” such that these support facilities need not even physically adjoin the main facility. For example, EPA considered two aluminum smelter facilities adjacent, despite their 3.4 mile separation, due to the extensive truck traffic between the two properties. See Letter from Steven C. Riva, U.S. EPA, to Robert Lenney, Alcoa Inc., Mar. 9, 2009. See also Letter from Pamela Blakely, U.S. EPA, to Don Sutton, Illinois EPA, re: General Dynamics, Ordinance & Tactical Systems, Inc., Mar. 14, 2006 (several plants considered a single source, despite their 8-mile separation, because they met a “common sense notion of a plant”).

Therefore, when EPA recently considered whether Summit Petroleum Corporation’s gas wells and associated flares should be considered a single source with its gas sweetening plant, EPA did not find it dispositive that several of the wells were located over a mile from the plant and were separated by other intervening properties. Instead, EPA noted that the wells and the plant were highly interdependent and under Summit’s common ownership. As a result, the wells and plant met the “common sense” notion of a single facility. See Letter from Cheryl Newton, U.S. EPA, to Scott Huber, Summit Petroleum Corporation, Oct. 18, 2010.

Summit challenged EPA’s single source determination, and the Sixth Circuit vacated that determination in Summit Petroleum Corporation v. U.S. EPA. The court found it “unreasonable and contrary to the plain meaning of the term ‘adjacent’” that EPA equated “functional relatedness” with “physical adjacency.” Id., at *2. The court ordered EPA to use instead the “ordinary, i.e., physical and geographical” meaning of the word “adjacent.” Id.

This decision will affect long-standing EPA policy and practice in making single source determinations. As the Director of EPA’s Region VIII Air Program noted, there is “no evidence that any EPA office has ever attempted to indicate a specific distance for ‘adjacent’ on anything other than a case-by-case basis.” See Letter from Richard Long, U.S. EPA, to Lynn Menlove, Utah Division of Air Quality, “Response to Request for Guidance in Defining Adjacent with Respect to Source Aggregation,” May 21, 1998, citing 45 Fed. Reg. 52,676, 52,695 (August 7, 1980) (“EPA is unable to say precisely at this point how far apart activities must be in order to be treated separately. The Agency can answer that question only through case-by-case determinations.”). Therefore, companies with “functional” single-source determinations should consider whether the recent Sixth Circuit decision could impact their status under the Title V program.

EPA was handed a setback in its efforts to establish aggressive controls on the energy industry in general, and the electric power industry in particular, when the D.C. Circuit issued its August 21, 2012 decision vacating the Cross-State Air Pollution Rule (CSAPR). EME Homer City Generation LP v. EPA, Case. No. 11-1302.

Significantly, the D.C. Circuit’s order not only vacated and remanded CSAPR, but also directed EPA to continue administering the previously-in-effect Clean Air Interstate Rule (CAIR) pending the promulgation of a valid replacement for CSAPR.

In a 2 to 1 decision, the court ruled that CSAPR exceeded EPA’s authority in two areas:

a. CSAPR impermissibly required upwind states to reduce more than their “significant contribution” to downwind non-attainment; and b. CSAPR deprived upwind states of the initial opportunity to implement any required emission reductions by immediately imposing a Federal Implementation Plan.

Significantly, the opinion of the court sets forth a roadmap for the development of a CSAPR replacement rule. This is accomplished by the court’s establishing “several red lines that cabin EPA’s authority.” In many cases the court offers specific examples of the types of calculations that EPA would have to make in order to determine permissible emission reductions. These “red lines” and example calculations are summarized below:

1. EPA cannot force an upwind state to reduce more than its own contribution to a downwind state minus what level EPA determines to be insignificant.

Example: If 3 units were set at the level of insignificance and an upwind state’s contribution to nonattainment in a downwind state is 30 units, then the most reduction that could be required of the upwind state would be 27.

2. EPA’s authority to force reductions on upwind states ends at the point where the downwind state achieves attainment.

3. The extent to which an upwind state’s contribution is significant depends on the relative contribution to nonattainment of other upwind states. The obligation to reduce emissions in the upwind states must be allocated “in proportion to the size of their contributions to downwind non-attainment.”

Example 1: Assume that the relevant national ambient air quality standard (NAAQS) is 100 units, that the ambient level of the at-issue pollutant in downwind state A is 150 units, and that state A is contributing 90 units to that overall concentration. Assume also that three upwind states are each contributing 20 units to the total ambient concentration in downwind state A. Under those circumstances, downwind state A is entitled to at most 50 units of relief -- with the 3 upwind states each contributing 16 2/3 units.

Example 2: If the scenario in Example 1 were changed only to the extent that the upwind states contributed 10, 20 and 30 units respectively, the upwind states would be obligated to reduce their contributions by 8 1/3, 16 2/3 and 25 units, respectively.

Example 3: If the air quality measurement in Example 1 was 180 units and downwind state A contributed 120 of those units, with 3 upwind states contributing 20 units each, then downwind state A is entitled to at most 60 units of relief to be distributed proportionately among the upwind states.

4. EPA may consider costs, but only to further lower an individual state’s emission reduction obligation. EPA may do this in a way that benefits some upwind states more than others. The objective of reducing the control obligation of an upwind state would be to prevent exorbitant costs from being imposed on certain upwind states.

5. EPA must ensure that the combined obligations of the various upwind states do not produce more control than necessary for the downwind state to achieve the NAAQS.

Example: If state A reduces 5,000 tons of NOx to achieve its largest downwind emission reduction obligation while state B reduces 2,000 tons for the same purpose, and if EPA modeling then shows that “all downwind non-attainment” would be resolved if the combined reduction of the two states were 10% lower, then EPA would be obligated to reduce the emissions reduction obligation of the upwind states by 10%.

The court’s ultimate holding on this aspect of the CSAPR decision is:

States are obligated to prohibit only those “amounts” of pollution “which will . . . contribute significantly” to downwind attainment problems – and no more. Because the Transport Rule exceeds those limits, and indeed does not really try to meet those requirements, it cannot stand.

Even as EPA considers its next steps in the wake of the decision, states and regulated sources will begin to focus on how to develop and implement a program to address interstate air quality that satisfies the new ground rules that have been established by the court.

On December 2, 2011, EPA proposed its fourth round of regulations governing industrial boilers and process heaters (i.e. the boiler MACT standards). [EPA Notice] Although additional changes are unlikely (given that this is EPA's fourth set of revisions), EPA is providing a 60-day comment period and does not expect to finalize the regulations until spring (likely April) of 2012.

EPA maintains that the reworked regulations provide greater flexibility, reduce the number of boilers to which the regulations would actually apply, and will ultimately cut the cost of implementation by nearly 50% from the original 2010 proposed rules. Groups such as the National Association of Manufacturers, however, remain opposed and continue to press for a legislative fix if EPA fails to sufficiently consider the added expense that even the newly proposed regulations will impose on goods manufactured in the United States. In response to EPA's issuance of the proposed rules, Senator James Inhofe (R-Okla.) of the Senate Committee on Environment and Public Works stated that, although he appreciated EPA's acknowledgment of the potential economic impacts and efforts to revise the rules, the revised rules would still have too great an economic impact on the United States. Sen. Inhofe then pressed Senate Majority Leader Harry Reid (D-Nev.) to allow a vote on the House-passed EPA Regulatory Relief Act.

According to EPA, the major source proposal, which is the part of the proposed regulations that impose actual control technology, would now cover less than 1% of the boilers in the United States (approximately 14,000 boilers). For boilers located at smaller facilities, such as universities, hospitals, and commercial buildings, only a very small number would actually have to take any additional steps to comply with the proposed rule; the vast majority would simply be required to perform maintenance and routine tune-ups. Highlighting some of the specific changes, the proposed regulations:

• Set new emission limits for mercury, hydrogen chloride, particulate matter, and carbon monoxide (the last two of which serve as surrogates for metallic and organic pollutants), many of which, however, are as stringent or actually more stringent than the limits provided in the previous version of the regulations.

• Increase the number of boiler subcategories (for which subcategory-specific emissions limits are proposed) to fourteen.

• Eliminate the numeric emission limit for dioxins/furans, noting in the preamble that the level previously proposed could not be accurately measured with existing technology, and instead tackle dioxin/furan emissions by imposing work practice standards that include periodic tune-ups to ensure good combustion.

• Provide greater flexibility than was previously allowed by providing for the use of a variety of alternative emissions limits and compliance demonstration methods (for example, a facility with more than one boiler can now choose to average emissions as long as the source as a whole is less than 90% of the applicable standard).

• Revise the compliance deadlines, providing three years from publication of the final rule to comply (the June 4, 2010 date of the initial proposed regulations, however, will remain the date for determining whether a unit is considered a "new" or "existing" unit).

In conjunction with reworking the boiler MACT standards, EPA revisited the Commercial/Industrial Solid Waste Incinerators (CISWI) rules and the Non-Hazardous Secondary Material (NHSM) rules to provide greater clarity and flexibility as to what types of secondary materials constitute a non-waste fuel. The changes to the regulations also expressly classify a number of secondary materials as non-wastes when used as fuel and provide a mechanism for requesting such a determination from EPA for other materials.

American College of Environmental Lawyers, The ACOEL, is a professionalassociation of lawyers distinguished by experience and high standards in the practice of environmental law, ethics, and the development of environmental law.